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WEC Energy’s Better-Than-Industry-Average Dividend Growth

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Dividends

WEC Energy Group (WEC) paid dividends per share of $1.83 in 2015. This was more than a 17% increase in dividends compared to 2014. Considering the longer term horizon, WEC managed to post total returns of 255% in the last ten years. Returns of broader equities as well the S&P Utilities index stayed at more than 100% in the same period. WEC has also outperformed its peers over the last three- and five-year periods.

WEC Energy is targeting a dividend payout ratio of 65%–70% in the next couple of years, which is in line with industry trends. WEC’s growth plans are backed by a strong capital spending plan, which bodes well for dividend growth.

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Dividend yield

As of April 15, 2016, WEC Energy’s dividend yield is 3.4%. On average, the yield for utilities (RYU) is just under 4%. As for peers, Eversource Energy’s (ES) dividend yield is 3.1%, while Consolidated Edison’s (ED) is 3.5%. Large-cap utilities Duke Energy (DUK) and Southern Company (SO) have yields near 4%.

WEC’s Integrys acquisition is expected to positively contribute to WEC’s earnings, which may improve dividends. The company is targeting 6%–8% earnings growth for 2016. It expects dividends to grow more than 8%, which is better than the industry average. We’ll look at future dividends in more detail in later parts of this series.

WEC Energy stuck to its expected target dividend rate and raised dividends by more than 8% this year. It paid $0.50 per share in 1Q16 versus $0.45 in 4Q15.

Next, we’ll look at utilities, including WEC Energy, which are still trading at below average yields.

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